Thanks for nothing, Fed...

It's almost unbelievable, but the minutes of the Federal Open Market Committee's Aug. 7 policy-setting meeting were revealed today, and showed that members remained focused on inflation risks rather than the widening impact of credit problems.

The market is melting down, but hey! Let's worry about inflation! We don't need no stinkin' Fed funds rate cut!

Sheesh.

Anyway, you know the market is not having a good day when the best-looking charts are those of the ProShares UltraShort ETFs, traded on the Amex.

Oh well, tomorrow is another day, and stocks are actually looking pretty good in after-hour trading.

Another day, another 78.38% for SCON...

It's always interesting when you think a stock is "done" after a huge move, and it pops up another 78.38% the next day.

But that's exactly what SCON did today. It's been a hoot watching this stock over the past few days. Starting with the original Baffle back on 8/21/07 with a great annual return pop of 32.7%, the stock romped 21.33%, 3.52%, 25.66%, and now today's rocket launch of 78.38%! This is what Baffles can do. And this one will go into our marketing materials in the future, you can count on that!

Other than SCON, basically all stocks with "China" in the name of the company went ballistic today. Included in that list are CPSL, ACH, LFC, SHI, ZNH, CTDC, FFHL, CFSG, YZC and many others.

The market is rocketing higher, but the volume is not there...

Well, I guess we'll take a quiet week of gains over a voluminous week of losses any day.

The market appears to be bouncing back from the recent mini-meltdown just as fast as it collapsed. But the volume is just not there in most cases. Chart after chart shows strong recoveries in price action, but the volume is almost anemic in some cases. Interesting.

Still, the broad market indices notched one of the biggest up weeks of the year. The Nasdaq sprang 2.9%, the Dow and S&P 500 both bagged 2.3% gains, and the NYSE Composite surged a healthy 3.1%. Not too shabby, even without the volume in most cases.

But we are still in the Summer Doldrums for the most part. Could be extremely interesting when the big-time traders get back from The Hamptons after Labor Day!

We are already short-term overbought on lots of my favorite stocks...

What a difference a week makes!

From being drastically oversold on most stocks in the market to the other extreme - drastically overbought - in just four days is pretty amazing. But it looks like that's where we are now, and the market already needs a "cooling off" period.

In most of the charts of my favorite stocks, I'm seeing stochastics scraping the sky and in some cases curling down from the overbought area. That is not where you want to be putting in initial buy orders. In fact, that's where you should be considering buying puts - or selling calls in some cases - against your position (if you want to hold on to the stock for the longer term).

So while I'm still cautiously bullish in the longer term, we need a pullback of some sort here to keep things from getting out of hand. But I don't expect the pullback to be that long or that deep.

I just never thought I'd be uttering those words so soon after the recent market carnage!

It's like "Old Home" week...

I'm continuing to see some good old friends pop back up on my stock scans.

Some of these stocks I'd almost forgotten about - like ESRX. That one had a nice run in 2005, and was a mainstay in my Gun To The Head Investor service for quite some time. And then it fell off my radar screen as it went into months of basing action.

But here it is again - hitting one of my scans today - and about to break out to a new all-time high. It gave me a nice, nostalgic feeling.

Other stocks were newer "old friends" - and basically just resuming their solid upward trends. Stocks like LPHI, MDR, FWLT, DRYS, LWAY, CALM, CF, KMGB, PSMT, CMED, OMTR, ANIK, RVBD, SINA, SOHU, SNCR, NVTL, etc.

It sure is nice to see some of my old favorites taking off again. C'mon, TASR - rejoin the party!

It may be getting time to BUTT!

SCON up 32.7%. RAE up 23.6%. OPX up 29%. CASM up 25.56%. DDSS up 20.12%. INNO up 19.76%.

Some of the best returns of the year? Nope. Some of the best returns TODAY in the market. All of the above trade setups were called in our chat room today.

While everyone else is buying into the "fear and loathing" of the market right now, we are happily finding these setups each and every day.

I'm really liking certain aspects of the market right now. In fact, I think it may be getting time to BUTT on some stocks!

BUTT is my acronym for Back Up The Truck. By that I mean I'm liking certain stocks so much that I believe it's time to Back Up The Truck and buy them.

What stocks am I talking about?

Some of the former leaders of the market to begin with. We're talking AAPL, RIMM, BIDU, SYNA, ISRG, AMZN, NILE, GRMN, most of the Shippers, Solars, Ag Chemicals, etc.

Also watch new issue VMW. Up over 15% today, this one could be huge.

As I stated in the last post, I think we just entered a new bull market in stocks last Friday, due to the current and expected future actions of the Fed. I think interest rate increases are over for this cycle, and rate reductions are now in the cards.

Go back to 1995 and see what happened at the beginning of the last interest rate reduction cycle - the kickoff of one of the biggest bull markets of all time! While I don't think we'll get an exact repeat of that phenomenon, anything close could be life-changing.

Another decent day in the markets...

The markets continued up today, rallying nicely in the afternoon. This is bull market action.

I was glad to see this kind of action, because I was a little afraid we would have a nasty pullback today after Friday's strong up-move due to the "Fed Surprise" - a half percentage point cut in the discount rate. But most of the euphoria continued.

What is also encouraging is the bounce-back action of some of the former market leaders - stocks like RIMM, BIDU, CRNT, the Shippers, the Ag Chemicals, some of the Chinese stocks, etc. Plus the fact I'm simply seeing some nice base breakout activity - something I've sorely missed for some time.

I think that the market euphoria will eventually settle down though, and that the markets still expect a healthy cut in the regular Fed funds rate at the September meeting, if not before. But we'll take each day as it comes.

Gentle Ben to the rescue! Thank you, sir...

In a surprise move, the Federal Reserve, led by "Gentle" Ben Bernanke, gave markets an unexpected jolt Friday by loweriing the discount rate a full half of a percentage point, from 6.25% down to 5.75%.

The discount rate is the rate at which the Fed charges major financial institutions in need of emergency funds. The Fed tactic is rarely used, and even in this case is largely symbolic. The markets still expect a cut in the regular Fed funds rate in September.

The Fed's tactic is seen mainly to calm down nervous investors upset at subprime mortgage woes rippling through the world's credit markets. The move by itself will have little effect on the economy or overall credit conditions.

But the markets still were thrilled by the "gift" from the Fed, and exploded to the upside on Friday. The DJIA ended the day up 233.30 points, or 1.82%, and the Nasdaq did even better percentage-wise, up almost 54 points and 2.2%. What a relief from the eerie Armageddon scenario just a few days ago!

While we may not be totally out of the woods yet, candlestick analysis tells us that at least a temporary bottom is in place. Both the DJIA and Nas charts show what I call a "MONSTAR" bottoming pattern - which is a "Morning Star on Steroids". So it should be a very interesting week coming up.

It's Hammer Time! At least it was on Thursday in the markets...

As I watched the markets earlier Thursday morning sink lower and lower, my mood matched that of the market. I even made a comment on my chat room about the market crashing - that if it was going to do so, it should just go ahead and do it and get it over with!

But all of a sudden I had this feeling. I felt that somehow things would turn around today and we would see huge Hammers in the charts of the Dow and Nasdaq market indices at the end of the day. Wishful thinking at the time, with the Dow down 322 points. But I just thought we would either bounce back big today or just crash. And I always try to stay on the optimistic side.

Well, as it turned out, it was indeed Hammer Time today! The Dow was even green for awhile, but succumbed to some last-minute selling and ended slightly in the red. But the S&P 500 and 600 both ended in the green. What a day!

Especially strong today were the Regional Banks. Chart after chart in that sector showed nice ARM setups. Some of these little bank stocks have popped over 30% just in the past few days, in this dismal market!

And PLX was amazing - again. I saw it earlier in the day with a nice ARM setup, and thought it might be a good buy in a better market. Well, the darn thing exploded late in the day, ending up an incredible 56.3% for the day! And this is not some penny-ante stock - it started the day at $24 and ended the day at $38.20!

Where, oh where, is the bottom of this market pullback?

Earlier this morning, I thought it might be today. Both the Dow and the Nas were in the green for awhile, showing decent bottoming candlestick signals. But that did not last too long.

The markets sold off - once again - later in the day. That's classic bear market action. Again, I have no clue - or preconceived notion - of where the bottom of this pullback will end up. I'll let the market itself tell me that. Obviously, the previous rally attempt is DOA for now.

But even in the midst of doom and gloom, I always like to point out stocks that are "taking the high road" and exploding in value on the most dismal of market days. Today's hero is ABPI, up an amazing 49.17% for the day, with 17.9% of that move occurring in the last five minutes!

Ok, so we're still in the woods, and there are fewer bright spots...

The recent Hammer signal on the Dow - the one I thought stamped out the bottom of this pullback, was just taken out and shot today with the Dow's 207.61 point plunge. The Nasdaq did even worse percentage-wise. Now all bets are off. I don't have a clue where this market bottoms out. I do think we are due for another nice bounce back to the upside though, since the stochastics are rocketing towards the oversold area again on both indexes.

You know you're in trouble - at least if you want to go long - when the best looking charts in the market are those of the ProShares UltraShort ETF's. Most of those obviously were beauties today.

But even in the most rotten of markets, there are always a handful of stocks with unreal returns. Take a look at MODT for a good example. I first saw it when it was up "only" 23% for the day. The chart showed a beauty of a BullShot, one of my favorite bottoming action signals that usually set up on a stock that everyone has "thrown in the towel" on. MODT went on to score a one-day gain of 51.43%. Other stocks up at least 20% today include SIMC - up 24.18%, XNN - up 23.73%, and OVRL - up 23.46%.

I guess we're not out of the woods yet, but there are some bright spots...

I thought we would be looking at a big-time Morning Star on the Dow Jones chart at the end of the day, and a nice reversal on the Nasdaq as well. That proved to be wishful thinking.

The Dow Jones chart shows a wimpy Doji at day's end, and the Nasdaq sports an ominous gap up dark candle that ran into resistance at the 10ema. Not giving me a warm and fuzzy feeling overall. But there were some bright spots in the market.

For instance, most of the BABEs I mentioned in the last post continued nicely, generating 5-10% and more pops today. Not too shabby. And lots more Morning Stars and MONSTARS set up today as well. Some of the strongest sectors in the market - like the Ag Chemicals and the Shippers - firmed up today too. There were also a handful of fundamentally strong individual stocks that saw good bounces back to the upside as well.

Anyway, I'm not ready to BUTT (Back Up The Truck) yet, but I'm seeing some kicked-down bargains that may bounce back with a vengeance.

This market is the most schizoid I've seen it in a very, very long time...

If you're having trouble trying to figure this market out, you're not alone.

With the Dow up 200+ points one day, down almost 400 points the next day, up, down, up, up, down, etc. it's enough to make you sick at your stomach! So what to do?

One technique is to simply go to cash until the market gets out of its "drunken sailor" mode. That would be the safest, but not the most fun.

Even in today's market, for instance, there were huge gains to be made. And not just on the short side, although there were plenty of those today. In a down market, I like to look for the stocks that are just totally ignoring the general market weakness and heading upstream against the current. Those are often your strongest stocks when the market as a whole turns around.

A couple of examples today would be KNOT, up almost 25% on a great earnings report, and PSPT, up over 30% in three days (about half of that came today in a lousy market) after an obvious Bullish Engulfing candle ended the recent stiff downtrend of the stock.

Obviously, my "return of the bull market" theory took a hit today. But I'm not quite ready to discard it yet. Let's see if recent support can hold for the major market indices, and then I'll make a decision. After all, we may see the Dow skyrocket 500 points tomorrow, the way things are going!

What can I say? You could have almost just thrown a dart on Wednesday and hit a stock up big in value...

It's now my firm belief that a new bull market has begun. I still think it's just the resumption of the "old" bull market, and we just went into a sharp little correction with some panic selling thrown in.

Lots of my fellow traders are still claiming this to be just a strong short-covering rally, and they could well be right. But the proof is there for my theory also.

First, the market is in a confirmed rally. You've now had not one, but TWO follow-through days after the initial rally attempt in the Dow last week. You've had four out of the last five days up in the NASDAQ as well.

Second, this rally is broad-based. Just about everything went up on Wednesday, from Restaurants to Semiconductors to Gold to Biotech, and not just the bombed-out Financial and Homebuilding stocks (which are also skyrocketing).

And last but not least are simply the incredible amount of stocks that were up huge Wednesday - I'm talking 10-20% and more - and most of them popped from extremely strong candlestick bottoming signal patterns. If this is not a major bottom, then we are in deep caca.

So that's my story and I'm sticking to it, at least until proven wrong!